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Heat generated by batteries is a long-term concern for EV makers.
Brendon Thorne/Getty Images
Battery fires are a problem for electric-vehicle makers, but exactly how serious is hard to assess. The newness of the cars leads to intense media focus on events in the industry, potentially making EV-related problems at Tesla or General Motors appear worse. What investors need is context.
Tesla (ticker: TSLA) CEO Elon Musk endorsed one effort to provide that—a post saying fires have occurred in 0.01% of Tesla cars on the road, far fewer than for the car industry as a whole—in a Tuesday tweet. He appears to believe EVs might be getting a bad rap.
Tesla didn’t respond to a request for comment about battery fires, but the company has sold about 1.6 million cars over its history. GLJ Research analyst Gordon Johnson believes the company has had about 160 fires, so the 0.01% math appears to hold up.
Johnson is a bear on Tesla stock. He rates shares at Sell and has a target of $67 for the stock price, the lowest on Wall Street. Shares were at $739.82 on Tuesday morning.
An acceptable level of fires, of course, is zero, but they do happen. Data from the National Highway Traffic Safety Administration and the National Fire Prevention Association indicate there are about 200,000 car fires in the U.S. a year, which is about 0.08% of the 276 million cars, motorcycles, heavy-duty trucks, and buses on U.S. roads.
The Tesla figure, at 0.01%, covers many years. Very roughly speaking, it appears that Tesla vehicles may be less likely to catch fire than any other car, and are certainly no more likely to do so.
Managing heat in lithium-ion batteries will be an issue for EV makers forever. Musk commented on that at the company’s August artificial-intelligence event.
“Tesla has a lot of expertise in power electronics and cooling,” said Musk. He was talking about how Tesla has used its expertise in managing batteries in its cars to build the supercomputer used to help improve its autonomous-driving functions. Supercomputers generate heat too. “Getting heat out is extremely important,” Musk said.
The most recent battery-fire story, of course, has nothing to do with Tesla.
General Motors
(GM) recalled about 140,000 Chevy Bolt EVs because they have an increased risk of battery fires. The discovery of a manufacturing defect, rather than a series of fires, drove the recall, but it still caused investors to focus on the issue.
Investors can also react badly to news of accidents involving EVs, and Teslas in particular, given the company’s efforts to develop autonomous vehicles. Context is useful here as well: NHTSA reports about one traffic accident for every 500,000 miles driven. Tesla says its cars are in an accident about every 1 million miles.
Tesla stock is bouncing back after a dreadful Monday. Shares were up 1.2% in morning trading, while the
S&P 500
and
Dow Jones Industrial Average
were up about 0.1%. Tesla stock dropped 3.9% Monday as fear of a credit crisis triggered by the Chinese real estate company
China Evergrande
(3333. Hong Kong) sent the entire market tumbling.
Battery fires had nothing to do with it.
Write to Al Root at allen.root@dowjones.com